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Global Shift: Implications of a
Post-Western World
Panel One: Competing Economic Models
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Jacob F. Kirkegaard, Peterson Institute
Outline
1)
The EU Crisis Diagnosis
2)
Different EU Economic Models
1)
The Long-Term Concerns
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1)
Concluding Remarks
The EU Crisis Diagnosis
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The EU Crisis Diagnosis
Design Flaws, Fiscal or BoP Crisis?
No agreement exists regarding the cause of the European debt crisis;
1)
1)
1)
The inevitable result of a flawed construction of a monetary union
without being reasonably close to an OCA, i.e. without labor mobility
or a central transfer mechanism/fiscal union?
The inevitable result of a loss foreign financing for excessively large
current account deficits, arising from competitiveness divergences,
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i.e. German
compression?
The inevitable result of unsustainable fiscal policies, which markets
ignored for ten years and then suddenly woke up to when the real
estate/construction growth model collapsed?
In my opinion, it was mostly 3), although 2) played an unhelpful role
Result: The EU sovereign debt crisis of 2010 accelerates global shifts,
but were not caused by them
Different EU Economic Models
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Different EU Economic Models
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The Long-Term Concerns
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The Long-Term Concerns
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The Long-Term Concerns
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Concluding Remarks
The EU will decline substantially as a share of world GDP, but far less so
in GDP/capita terms
•
EU members (and their economic models) face different degrees of
challenges in the Post-Western World:
•
Southern/Eastern Europe – rigid, low-skilled, low-tech and depopulating
(and now without German interest rates!) – most at risk
•
North-West Europe – more flexible, higher skilled, higher-tech and less
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demographic
trends
– willstyle
cope better
•
Europe has had a “good crisis” so far in terms of dealing with several of
its rigidities
•
Principal longer-term political challenge “for Europe” from both crisis and
the rise of Asia will be the end of economic convergence between the
center and periphery
•